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regular-article-logo Saturday, 15 June 2024

Vodafone Idea banks on conversion of government dues into equity for revival

India’s No. 3 telecom operator, in the meantime, is pressing ahead with its negotiations with banks to raise around ₹20,000 crore and additional non-fund based facilities of up to ₹10,000 crore

Our Special Correspondent Mumbai Published 21.05.24, 11:23 AM
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Debt-ridden Vodafone Idea Limited (ViL) is banking on the latest equity infusion of 20,000 crore and the conversion of government dues into equity for its revival as the telco sank deeper into the red in the fourth quarter of last fiscal reporting a loss of 7,675 crore against 6,419 crore in the year-ago period.

At an earnings call, Vodafone Idea CEO Akshaya Moondra said the company is looking at the conversion of the instalments of government dues for 2025-26 and 2026-27 into equities.

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“According to the reform package, they are convertible.’’

India’s No. 3 telecom operator, in the meantime, is pressing ahead with its negotiations with banks to raise around 20,000 crore and additional non-fund based facilities of up to 10,000 crore.

Vodafone Idea has said that the equity, debt and non-fund-based facilities will be utilised primarily towards capex which is expected to be in the range of 50,000-55,000 crore over three years.

The capex will be utilised towards expanding 4G population coverage in 17 priority circles, 5G launch in key cities or geographies and capacity expansion to address the increasing data demand.

However, brokerages remain cautious given the debt on their books.

A note from Motilal Oswal said the telco still holds a debt of 2.1 trillion.

According to its analysts, there is an annual instalment of 43,000 crore from 2025-26 onwards in debt repayments.

“This looks challenging against 2023-24 annualised EBITDA of 8,400 crore.

“The significant amount of cash required to service debt leaves limited upside opportunities for equity holders, despite the high operating leverage opportunity from any source of ARPU (average revenue per user) increase. We expect the conversion into equity of unpaid instalment post moratorium to start by 2025-26/2026-27,’’ Motilal Oswal added in its note.

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